2. LOS MARCADORES DEL DISCURSO: UNA CATEGORÍA LINGÜÍSTICA
2.9. Recapitulación y conclusiones
Under the proposed rules, an issuer would have been required to make a
reasonable country of origin inquiry as to whether its conflict minerals originated in the Covered Countries. After the reasonable country of origin inquiry, if an issuer concluded that its conflict minerals did not originate in the Covered Countries, the issuer would have been required to disclose its conclusion in the body of its annual report and on its
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Internet website.461 Also, the proposed rules would have required that such an issuer disclose in the body of its annual report and on its Internet website the reasonable country of origin inquiry it used in making that determination. The proposed rules would not, however, have required an issuer that, after its reasonable country of origin inquiry, determined that its conflict minerals did not originate in the Covered Countries to disclose the actual countries from which the conflict minerals originated. The issuer would have been required to provide in the body of the annual report the Internet address on which the disclosure was posted and retain the information on the website at least until the issuer’s subsequent annual report was filed. Finally, the issuer would have been required to maintain reviewable business records in support of its negative determination. The issuer, however, would not have been required to make any other disclosures with regard to the conflict minerals that did not originate in the Covered Countries.
Alternatively, if an issuer determined through its reasonable country of origin inquiry that any of its conflict minerals originated in the Covered Countries, or if the issuer was unable to determine after a reasonable country of origin inquiry that its conflict minerals did not originate in the Covered Countries, the proposed rules would have required the issuer to disclose this result in the body of its annual report and disclose that the Conflict Minerals Report was furnished as an exhibit to its annual report.
Additionally, the issuer would have been required to make available its Conflict Minerals Report on its Internet website until its subsequent annual report was filed, disclose in the body of its annual report that the Conflict Minerals Report was posted on its Internet
461 See Exchange Act Section 13(p)(1)(E). The issuer would be required to keep this information on its
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website, and provide the Internet address on which the Conflict Minerals Report was located.462 Under the proposed rules, such an issuer would have been required to post the Conflict Minerals Report on its Internet website, but the issuer would not have had to post any of the disclosures it provided in the body of its annual report on its website.
b. Comments on the Proposed Rules
Almost all of those that commented on this point believed that the final rule should require some very brief discussion of the conflict minerals information in the body of the annual report.463 Some commentators indicated, however, that an issuer should not have to provide any disclosure in the body of the annual report,464 and one commentator stated that an issuer should not have to describe the findings of its Conflict Minerals Report in the body of the annual report.465 Other commentators remarked that the full text of the Conflict Minerals Report could be provided as an exhibit to an issuer’s annual report.466 In contrast, a few commentators asserted that an issuer should be required to include its full country of origin disclosure and the full text of its Conflict Minerals Report in the body of the annual report.467
A number of commentators agreed that, as proposed, an issuer with conflict minerals that did not originate in the Covered Countries should be required to disclose its
462 See Exchange Act Section 13(p)(1)(E).
463 See, e.g., letters from AngloGold, Howland, NEI, NY State Bar, SEMI, SIF I, and TriQuint I. 464 See letters from ITIC I and WGC II.
465 See letter from NY State Bar.
466 See letters from Ford, NEI, and WGC II. 467 See letters from CRS I and Earthworks.
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reasonable country of inquiry because not requiring such disclosure would undercut the essential purpose of the Conflict Minerals Statutory Provision.468 A number of other commentators, however, disagreed,469 and some of these commentators justified their position by noting that the Conflict Minerals Statutory Provision does not require such disclosure and asserted that such disclosure would not serve any constructive purpose.470 Also, of the many commentators that discussed this topic,471 one asserted that an issuer with no conflict minerals from the Covered Countries should be required to disclose the name of the country from which its conflict minerals’ originated so that investors could determine the veracity of the conclusion.472
Most of the commentators that discussed the topic agreed that, as proposed, an issuer should be required to maintain reviewable business records when it determines that its conflict minerals did not originate in the Covered Countries.473 These commentators disagreed, however, about the length of time that the final rule should require the records be kept. The suggested durations ranged from one year to a period covering the duration
468 See, e.g., letters from CRS I, Earthworks, Hileman Consulting, Methodist Pension, MSG I, NEI, TIC,
Tiffany, and TriQuint I.
469 See, e.g., letters from AngloGold, Cleary Gottlieb, Howland, NMA II, NY State Bar, SEMI, and WGC
II.
470 See letters from Cleary Gottlieb, NY State Bar, and SEMI.
471 See, e.g., letters from AngloGold, Global Tungsten I, Howland, IPC I, ITRI I, JVC et al. II, NAM I,
NEI, NMA II, RMA, SEMI, State II, TIC, TriQuint I, and WGC II.
472 See letter from SIF I. See also letter from State II (noting that such a requirement would encourage
issuers to establish due diligence procedures across their conflict mineral supply chains regardless of the minerals’ country of origin).
473 See, e.g., letters from AngloGold, Columban Center et al., CRS I, Hileman Consulting, Earthworks,
Global Witness I, Howland, ICGLR, JVC et al. II, Kemet, MSG I, NEI, NMA II, Sen. Durbin / Rep. McDermott, SIF I, State II, TIAA-CREF, TIC, TriQuint I, and WGC II.
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of the law.474 In addition, some commentators recommended that the final rule clarify the meaning of “reviewable business records.”475 There were a few commentators, however, that did not believe that the final rule should require an issuer to retain reviewable business records at all because such a requirement is not in the Conflict Minerals Statutory Provision, an issuer should be permitted to create its own records as it does for the financial and other information in its annual reports, and such a rule would provide an independent books and records requirement that goes beyond the Conflict Minerals Statutory Provision.476
c. Final Rule
After considering the comments, we are modifying the proposal regarding the substantive disclosures in the body of the specialized disclosure report, in part. An issuer that determines that, following its reasonable country of origin inquiry, its conflict
minerals did not originate in the Covered Countries or came from recycled or scrap sources or has no reason to believe that its necessary conflict minerals may have originated in the Covered Countries or may not be from recycled or scrap sources, is required to make certain disclosures in the body of its specialized disclosure report on Form SD,477 under the “Conflict Minerals Disclosure” heading. This requirement is
474 Suggested durations included, “multiple years,” “a sufficiently long period of time,” “as long as their
home jurisdictions (of foreign private issuers) require,” “for the duration of the law,” one year, two years, three years, five years, seven years, and 10 years. See, e.g., letters from AngloGold, Columban Center et al., CRS I, Earthworks, Global Witness I, Hileman Consulting, Howland, ICGLR, Kemet, MSG I, NEI, NMA II, Sen. Durbin / Rep. McDermott, SIF I, State II, TIC, TriQuint I, Trott, and WGC II.
475 See letters from JVC et al. II and TIC.
476 See letters from Cleary Gottlieb, NAM I, SEMI, and Tiffany.
477 As discussed above, the final rule will require that all disclosure be in the body of the issuer’s
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generally consistent with the proposal, except that the proposal required due diligence regarding conflict minerals from recycled or scrap sources. An issuer determining that its conflict minerals that did not originate in the Covered Countries or that came from
recycled or scrap sources or that has no reason to believe that its necessary conflict minerals may have originated in the Covered Countries or may not be from recycled or scrap sources must disclose its determination and results and provide a brief description of the inquiry it undertook and the results and provide a link to its Internet website where the disclosure is publicly available. However, in a change from the proposal, the final rule requires such an issuer to provide a brief description of the results of the inquiry it performed to demonstrate the basis for concluding that it is not required to submit a Conflict Minerals Report.
As discussed above, we note that there may be instances in which an issuer determines, based on its reasonable country of origin inquiry, that it has reason to believe it has conflict minerals that may have originated in the Covered Countries and may not be from recycled or scrap sources and, therefore, must exercise due diligence on the source and chain of custody of the conflict minerals. If, at any point during the exercise of that due diligence, the issuer determines that its conflict minerals did not originate in the Covered Countries or came from recycled or scrap sources, the issuer is not required to submit a Conflict Minerals Report. The issuer, however, is still required to submit a specialized disclosure report disclosing its determination and briefly describing the reasonable country of origin inquiry and the due diligence efforts it exercised and the results of the inquiry and due diligence efforts to demonstrate why the issuer believes that the conflict minerals did not originate in the Covered Countries or came from recycled or
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We note the views of some commentators that requiring issuers to describe their reasonable country of origin inquiry would impose costs neither justified nor required by the provision. Also, we note that the Conflict Minerals Statutory Provision requires only that a “person described” disclose annually “whether conflict minerals that are
necessary…did originate in the Democratic Republic of the Congo or an adjoining country and, in cases in which such conflict minerals did originate in any such country, submit to the Commission a report.”478 Therefore, the Conflict Minerals Statutory Provision only explicitly requires an issuer to provide additional disclosure if the issuer determines that its conflict minerals did originate in the Covered Countries.479
We believe, however, that requiring an issuer to provide a brief description of the reasonable country of origin inquiry it undertook is appropriate despite the additional costs associated with providing such a description. As discussed above, the reasonable country of origin inquiry is not a prescriptive standard and does not require certainty. As a result, there will likely be variation in the approaches taken by issuers. Consequently, we believe it is appropriate to require disclosure regarding the reasonable country of origin inquiry so that interested parties can evaluate “the degree of care” the issuer used
478 See Exchange Act Section 13(p)(1)(A).
479 See, e.g., letter from Cleary Gottlieb. This commentator argued “an issuer that concludes it has
necessary conflict minerals that did not (emphasis in original) originate in the Covered Countries must only disclose that conclusion – there is no requirement in the Dodd-Frank Act for disclosure of the inquiry process the issuer undertook in coming to that conclusion,” because the provision “only provides for increased disclosure requirements…once an issuer has affirmatively determined that its necessary conflict minerals originated in a DRC country.” Id.
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in making its negative determination,480 and it will “help ensure credibility of issuer disclosure.”481 Also, although the Conflict Minerals Statutory Provision does not explicitly require an issuer to provide further disclosure if the issuer determines that its conflict minerals did not originate in the Covered Countries, the provision does not provide that such disclosures cannot be required. Therefore, we believe that requiring this disclosure is permitted as well as appropriate.
As described above, the final rule does not prescribe particular steps or require an issuer to establish to a certainty that its minerals did not originate in the Covered
Countries or come from recycled or scrap sources. Instead, the final rule relies on a reasonable design and good faith execution approach. Requiring an issuer to briefly describe the results of the inquiry it performed is intended to enable stakeholders to assess the issuer’s reasonable country of origin design and its efforts in carrying out that design. Also, this disclosure is intended to allow stakeholders to form their own views on the reasonableness of the issuer’s efforts. Based on this information, stakeholders could advocate for different processes for individual issuers if they believe it is necessary.482 In addition, it is expected that reasonable country of origin inquiry processes will change over time based both on improved supply chain visibility and the results of an issuer’s prior year inquiry. Requiring an issuer to provide a brief description of the results of its
480 See letter from MSG I. 481 See letter from NEI.
482 In this regard, an issuer’s description of the results of the reasonable country of origin inquiry should
make clear why it determined that its conflict minerals did not originate in the Covered Countries. This is also the case for issuers that must disclose their reasonable country of origin inquiry and due diligence efforts if they determine, following their due diligence, that their conflict minerals did not originate in the Covered Countries or did come from recycled or scrap sources.
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inquiry, therefore, will allow stakeholders to track that progress and advocate for different procedures if they think it is necessary.
We have decided, however, not to adopt the proposed requirement for an issuer to maintain reviewable business records supporting its conclusion that its conflict minerals did not originate in the Covered Countries based on its reasonable country of origin. The Conflict Minerals Statutory Provision does not require an issuer to maintain reviewable business records to support its determination of the source of its conflict minerals. In addition, there does not appear to be a need for the rule to require that an issuer maintain such records. As one commentator noted, issuers “provide vast amounts of material information in, for example, Management’s Discussion and Analysis in periodic reports, for which the SEC does not impose specific record retention requirements for
maintaining the source materials used to generate the disclosures.”483 Therefore, we believe that it is unnecessary for us to require an issuer to maintain reviewable business records, although maintenance of appropriate records may be useful in demonstrating compliance with the final rule, and may be required by any nationally or internationally recognized due diligence framework applied by an issuer.
Also, in contrast to the proposal, we are not requiring an issuer to disclose in either its specialized disclosure report or its annual report, under a separate heading entitled “Conflict Minerals Disclosure,” whether any of its necessary conflict minerals originated in the Covered Countries or did not come from recycled or scrap sources or that the issuer was unable to determine that its conflict minerals did not originate in the
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Covered Countries or come from recycled or scrap sources. Under the proposal, an issuer required to provide a Conflict Minerals Report, including an issuer required to provide a Conflict Minerals Report because its conflict minerals came from the recycled or scrap sources, would have been required to disclose in the body of its annual report that it furnished a Conflict Minerals Report as an exhibit to its annual report, that the Conflict Minerals Report and certified independent private sector audit report were available on its Internet website, and the Internet address where the Conflict Minerals Report and audit report were located. Instead, to reduce some costs and burdens to issuers, the final rule only requires an issuer required to provide a Conflict Minerals Report to disclose in its specialized disclosure report, under a separate heading entitled “Conflict Minerals Disclosure,” that a Conflict Minerals Report is provided as an exhibit to its specialized disclosure report and to disclose a link to its Internet website where the Conflict Minerals Report is publicly available.
The final rule does not require an issuer to disclose in the body of its specialized disclosure report the reason that the issuer is providing a Conflict Minerals Report because that information will be disclosed by the issuer in the Conflict Minerals Report. Requiring that information also in the body of the specialized disclosure report would be redundant and unnecessary. Similarly, the final rule does not require an issuer to disclose in its specialized disclosure report that it has provided an audit report or a certification of the audit, if applicable, because the audit report and certification would be part of the Conflict Minerals Report already, so specifically mentioning the audit report or certification here is not necessary and may be confusing.
E. Step Three – Conflict Minerals Report’s Content and Supply Chain